APRA takes action against ‘unauthorised’ bank

The Australian Prudential Regulation Authority (APRA) has revealed it is pursuing an injunction in the Federal Court of Australia to stop an individual from engaging in what it alleges is unauthorised banking business and using the word ‘bank’ without the appropriate licence.

Under the Banking Act 1959 only authorised deposit-taking institutions (ADIs) licensed by APRA are legally permitted to carry on banking business in Australia, including referring to themselves as banks or describing their services as banking.

However, APRA has alleged that Andrew Morton Garrett has been ‘operating and marketing businesses in Australia that he describes as banks, despite not being authorised to carry on a banking business’.

The businesses in question are Dynamic Capital Bank, Banque de Capital Dynamique, and Banca di Como.

APRA has also alleged that Mr Garrett has “ignored” its demand to stop referring to the businesses as banks and cease any unauthorised banking business.

Speaking of the injunction, APRA deputy chair Margaret Cole encouraged customers to do their research before handing money over to unfamiliar businesses describing themselves as banks.

“APRA’s licensing regime, prudential framework and supervision protect bank depositors by requiring any business wanting to conduct banking business to meet stringent standards and requirements in areas such as capital, liquidity, governance and risk management,” Ms Cole said.

“We have limited information about Mr Garret’s businesses, including how many customers they have, because we don’t regulate them and they don’t report data to us.

“However, we are taking action to help prevent Australians mistakenly believing they are depositing money with an APRA-regulated institution and receiving the same protections.”

Ms Cole highlighted that one of the benefits of using APRA-regulated banks was that consumers can be assured they are protected by the government’s Financial Claims Scheme (FCS), which guarantees up to $250,000 per account.

To be an APRA-regulated institution also requires businesses to meet certain obligations such as the provision of data for its economic and financial statistics program.

The injunction is the latest action APRA has taken to ensure compliance in the banking arena. Earlier this month BNK Banking Corporation Limited (BNK) was hit with a $247,500 fine by APRA for failing to meet its reporting obligations.

At the time APRA member Therese McCarthy Hockey said the action by the prudential regulator sent a message to the industry of the importance of meeting reporting standards.

“We expect all entities to be compliant with our reporting standards to ensure APRA always has the most up-to-date information on the industries we regulate,” Ms McCarthy Hockey said.

“Access to accurate and timely data is critical for APRA to effectively monitor the safety and stability of Australia’s banking, insurance and superannuation systems.”

[Related: BNK fined for reporting failures]